EDITORIAL: Builders facing hard time

A GROWING list of insolvencies indicates the Hunter Region’s construction industry is entering one of its periodic downturns.

A GROWING list of insolvencies indicates the Hunter Region’s construction industry is entering one of its periodic downturns.

Insolvency specialists say more company closures are likely and employer and union representatives alike are pessimistic about this crucial sector of the economy.

The Hunter has been protected in recent years, economically at least, by the coal industry.

But with the coal boom apparently coming to an end, delays or cancellations to various coal-related infrastructure projects could spell the loss of as many as 5000 construction jobs. At the very least, a slowdown in the coal industry will add substantially to the pressures on a construction industry already facing tight margins and cash-flow problems.

The inter-connected nature of the industry is squarely in the sights of former ICAC commissioner Bruce Collins, who was appointed by the state to investigate construction industry insolvency. The Collins inquiry is charged with finding ways to safeguard the interests of sub-contractors. In a recent discussion paper, Collins observed a tendency ‘‘in these straitened times’’ to ‘‘squeeze’’ the next company in the supply chain and to ‘‘exploit variation clauses’’ in the contract in question.

But Collins also points out the need to disentangle construction industry problems from conditions in the broader economy.

In this light, official statistics show residential approvals in the Hunter have halved in the past decade despite a widely acknowledged shortage of housing.

The reasons for such a decline are complex but the relatively affordable nature of housing in the region – certainly in comparison with Sydney – seems to indicate that something other than a drop in demand is behind the decline.

For some householders, the doubts that have lingered since the global financial crisis have put a dampener on two decades worth of real estate driven consumption. Hunter Valley Research Foundation director of research Simon Deeming, who describes the residential construction industry as ‘‘phenomenally weak’’, says a more conservative outlook is leading people to renovate rather than move.

An apparent shortage of subdividable property may also be a factor. Large-scale residential offerings are few and far between as planners look increasingly to infill development to house a rising population.

Inevitably, though, a land shortage will tend to protect property prices – a reassurance for many people in testing times.